Pledges of market reforms to boost stocks

An investor is seen in a stock trading hall in Hangzhou, capital of east China’s Zhejiang Province, yesterday

China’s securities regulator has pledged broad reforms to the country’s capital markets, including boosting investment in the stock market, which has slumped to a near three-year low.
The China Securities Regulatory Commission said Beijing would encourage institutional investors – including the national pension fund – to increase their market holdings, according to a statement released late Monday.
Guo Shuqing, the commission’s chairman, also said in the statement that the government would allow foreign institutions to invest more in Chinese stocks through existing schemes.
China must “vigorously and safely promote the reform and opening of the securities and futures field,” Guo said.
Investors were cheered by the remarks, sending Chinese stocks up 1.53 percent in morning trade yesterday.
Analysts said the speech, given at an annual meeting which outlines the new year’s priorities, contained few new initiatives but was aimed at boosting market sentiment.
“The encouragement of more long-term institutional funds to flow into the stock market will help investors recover their confidence,” Zhang Yanbin, an analyst at Zheshang Securities, told AFP.
But he warned that China’s slowing economic growth this year would overhang stocks.
“The fundamental problems in the long-term are still concerns over the slowdown in domestic economic growth and tight monetary policy,” he said.
In a bid to boost growth and counter economic slowdowns in Europe and the United States, authorities in December cut the amount of money banks must hold in reserve for the first time in three years.
Chinese Premier Wen Jiabao also said at the weekend that Beijing will seek to raise confidence in the domestic stock market, in what investors widely took as a signal of future pro-market measures.
The benchmark Shanghai stock index gained 2.89 percent Monday, helped by Wen’s remarks, after lingering near a 33-month low over the last month.